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The Future of Outsourcing in India
aaditeshwar writes "Economist has an article on the current and projected state of outsourcing IT and other business processes to India. The biggest problem seems to be that the talent pool of skilled workers will not able to keep up. Currently there are about 700,000 people working in IT and outsourcing, which is likely to grow up to 2.3 million by 2010, but only 1.05 million new graduates will qualify from local colleges in the next 5 years leading to a shortfall of 500,000 workers! All this despite the fact that almost 2.5 million students graduate in India each year." From the article: "In IT the growth in Indian exports is expected to come both from the software market, and from 'traditional IT outsourcing'--such as the remote management of whole systems, a market now dominated by the big global IT consultancies. This is expected to rise from 8% of Indian sales now to about 30% in 2010, while software-development's share will fall from 55% to 39%. In business-process-offshoring, the big industries will remain banking and insurance. But rapid expansion is also expected in other areas, like legal services."
When they run out of people to hire in India, or when workers in India are expensive relative to workers in some other country, they'll move on to that other country - it's pretty much as simple as that. The quest for the most effective labour for the lowest price will never end.
Join the Empire! http://www.empirereborn.net/
I think that the point they are making is that India has demand for IT workers internally; that is, not originating from a foreign company. Obviously, every IT worker that works on an outsourced job is one unavailable for "internal" use, and vice versa.
I have heard that the job turnaround time in India for these jobs is very short, on the order of weeks, maybe months. Basically, the employers are slave drivers who burn out the employees very quickly. more information.
As an aside, there is no shortage of programmers in today's environment. Yeah, there may be a shortage of "Object-Oriented Perl" programmers out there, but, sheesh, do you really think it takes that long to re-train a "Scripting Perl" developer to be an Object-Oriented Perl developer--especially if the developer in question has Java or C++ on their resume.
The fact of the matter, which PHBs plain simply do not get, is this: A good programmer can become up to speed in a new language in a matter of days. You don't need five years of "Objected Oriented Perl" to be a decent OO Perl developer. Someone with two years of scripting perl, and two years of Java can learn OO Perl in under a week if they are a decent programmer.
To add insult to injury, Americans companies are not willing to train people on the job. There is no job training, nor employee loyalty in the US tech sector.
American companies would rather hire someone already working, causing that worker to betray the company they are working for, than hire someone not working and willing to be loyal to the company they work for. Dice's advertisments here on Slashdot encourage this kind of behavior, telling workers that their boss is being unfair,and that they should get a new job. Loyalty means nothing in a business climate where the "suits" are people who do not understand programmers, and are more insterested in short-term profits than in the long-term survival of their company and the economy as a whole.
I'm disgusted with the tech industry. I'm leaving the country and teaching English to foreigners (one nice perk: I can actually get a date there, unlike the US where computer people can't get dates) until I figure out what do do with my life.
Thanks for letting me rant. I think you understand why I am anonymous.
From the parent poster and TFA, it would appear that India will not be able to keep up with the demand for IT workers. The prevalent theory about agrarian societies driving demand for larger families (as opposed to middle class tradesmen) would appear to be contrary to the best interests of India. Perhaps the next generation of Indians that have grabbed the IT "brass ring" will produce larger families, if only to help their country meet demand for IT workers.
I go through at least 40 or 50 resumes in the US (Metro NYC area) to find one person worth hiring. And these are resumes that have been supposedly pre-screened by headhunters. Resume counts mean nothing if those tens of resumes represent poorly skilled people.
The problem is that India and China have the numbers. Once these places are tapped out because of increasing internal demand the cost advantages are going to dry up and then we will *really* hear the whining from business who don't want to pay a real salary to their technical professionals.
Is this concept so foreign to them now? These are US companies.. how about hiring US employees? Why does everything have to be freakin' outsourced?
There's plenty of geek talent in the US for the hiring. I wish these companies would hire in the US and help the US economy instead of throwing the money overseas.
Arrrgh.
-Z
[To add insult to injury, Americans companies are not willing to train people on the job. There is no job training, nor employee loyalty in the US tech sector.]
Oh, that is very true. I've interviewed many people to work for me and my boss has ordered me to turn them down in favor of waiting for more experienced people to come along. When that doesn't happen, THEN we hire the best inexperienced one in the bunch.
But now, as far as I've seen, this is true of all sectors.
Any job, even retailers like Target, demand years of experience first. Even if you have a degree, they want experience, too. Having a degree only means you are more competitive with other experienced workers.
No job except the lowest end of food service will ever hire someone without experience now.
--- Grow a pair, liberals... stop letting the Republicans bully you!
Every outsourcing story I've heard has ended in disaster, overrun budgets, wasting thousands of dollars sending employees to India for months at a time, and unmaintainable code ... all the while not being cheap enough to justify any of it.
Religion is a gateway psychosis. -- Dave Foley
I was an IT worker in India. I am Indian. Indian IT companies recrit all sorts of engineer i.e civil, mechanical, electrical, chemical etc apart from comp sci. Since most engineering students have atleast a common denominator of traits like analysis, rigourous coursework, maths etc. the IT companies know that they can train them in sofwtware with relative ease. Of course the CS grads get the more better technlogy to start with (says database. java etc) while the non - CS ones may have more maintenance, mainframe, testing kind of job to begin with. Most IT companies take grads and subject them to 1-3 months intensive introductory software training courses just like a mini college course. Check for example the infosys global education centre Also large Indian companies are in turn opening offices in China , Hungary etc to outsource the outsourcing.
Eastern Europe has a lot of IT/programmer types.
Yes, and they are riding the outsourcing wave as well (and good for them!). But they are focusing regionally - the eastern European states are mostly getting work from west European companies, and the Baltic states are working with Scandinavian companies. Skype was started by a couple of Swedes and has/had a lot of their developemnt in Estonia, for example.
I don't think there is that a large surplus pool left over for, say, American or Japanese companies when they're already part of the huge European market.
Trust the Computer. The Computer is your friend.
I'm not sure if you meant to write employee loyalty, but you hit the nail on the head.
I'm a junior executive in the telecom industry (a bit over 300 staff, and a total budget well over US$100M), and as every person with financial responsibilities can tell you, year end is budget season. I attempted to increase the amount of my training budgets to "grow" more talent internally (both technical and management), rather than always looking outside. HR cautioned me against it, even though I can well afford it: here is why.
If I train people, I raise my cost of employment, and therefore will not be able to pay as high of salaries as my "labour competitors" do. So I go and train up my people, and they use that training to jump ship to a higher paying company with a much worse training programme (doesn't matter: they have already been trained).
The fact is there is no total-good/total-bad in the current state of the professional labour market: there is plenty of blame to go around. I remember admonishments from my father about "in his day" he didn't worry about pay - just working for a good company for a lifetime. Now there is no loyalty in either direction.
The problem is that the group (employees or employers) that show loyalty first will be the biggest losers (see the example of me increasing my training budget and perversly losing employees). You have employees with a sense of entitlement (anyone who's done labour relations will tell you all about that) and employers who now feel different from their workforces.
How do we get out of this mess?
Sarcasm and hyperbole are the final refuges for weak minds
American companies would rather hire someone already working, causing that worker to betray the company they are working for, than hire someone not working and willing to be loyal to the company they work for
Betray?
Dude,
A company is not a country. When you work for a company, you're making a free exchange of your services for their money, and either of you is fully entitled to stop that relationship whenever you want, unless there are additional contract terms that apply.
If the main thing that you have to offer is "loyalty", well, I'll hire the guy with skills over you, every time.
I can actually get a date there, unlike the US where computer people can't get dates)
I suspect that your difficulty both with dating and employment stems from your sullenness.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
I'm astounded that after all of these India posts on /. and related places there aren't more people chiming in about their experience in India
I've only spent a week in India myself, but I grew up in SE Asia (Malaysia, Singapore, Indonesia). When I was there in the 1970's, Singapore had a rapidly expanding economy, Indonesia was just beginning to cash in on their oil resources, and Malaysia was a pretty sleepy kind of a place, where the average worker had no hope at all of sending his kids to high school, let alone college.
Today, Singapore is certainly a fully industrialized nation, Malaysia and Indonesia are pretty close, if they're not there yet, and I'm thrilled to see India following suit after about fifty years of stupidly trying to follow the Soviet model of centrally-planned squalor, while the infrastructure the Brits left behind slowly crumbled.
The people I met in Bangalore, Delhi, and Agra want a better life, and they're willing to work harder to get there than nearly anyone I've ever met in the USA or Europe. They impressed the hell out of me, and I wish them all the prosperity they can achieve.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Government will have to figure out how to tax those people, the outsource loophole, the company doesnt have to pay insurance, workers comp or benefits.
They do pay the taxes, insurance and other benefits in the country they outsource to. And with a very hot labour market over many years, and the countries growing wealthier, those costs are increasing and faster than in the stable industrialized countries the companies are based in.
In any case, all todays large companies are largely borderless. Most do not have a plurality of activity in any one country, and frequently their larges market is not in the same area their head office happens to reside. Outsourcing is not only to get cheaper development - it is also about having a prescence in very fast-growing markets.
Make it too difficult for them to service other countries and you may see just how quick it is to move the head office and postal adress to Britain, say, or Ireland, or any number of other feasible countries where thay probably already have a heavy prescence.
Trust the Computer. The Computer is your friend.
It all depends of freedom.
Everyone in the USA and Europe already buy all their stuff from China. Unless you count a second rate OS and other increasingly made abroad IP, I'm not sure what there is to buy from US anymore. I wish it were different. IP is a tenuous export at best, but it's a bogus one when it's based on imported research.
All the money in the world won't really standards of living in China because they are not free. People making goods there will continue to be abused by their owners who pocket it all.
It only takes one non free country to screw everything for everyone.
Friends don't help friends install M$ junk.
I agree with all of this. Many things will have to be sorted at these many levels of the social machine. Also to be considered is the cultural barriers posed with dealing business with in the context of an Indian mindset. Their fatalistic disposition can leave many of the more conscientious feeling at a loss for how to hope for the future in a joint venture. Even my limited experience with doing business within the Indian infrastuture leaves much to be desired in regard to honesty and integrity. The culture is and has been rife with corruption for decades. Bribes are the order of the day when gaining government approval for any transaction. I would even challenge the idea that the first-rev of a software project would be reasonably functional and ready for the first major tweaking by the Western workforce that knows what a conscientious work ethic looks like. Without constant monitoring, the Indian group would be tempted to convey a rosey picture of progress to the Western entity-in-charge leaving important items unaddressed.
No matter where you come from, where you were educated, if you don't have the two brain cells rubbin together to form innovative solutions to REAL problems people have, you won't get/hold a solid job.
Simple as that.
I don't care how many degrees from whatever school you have. If you can't see past the quick buck to real problems and their solutions you're just a tool in my eyes. People look down on Indians and Chinese because they're a dime a dozen [literally and figuratively] but what makes you think your neighbours in your comp.sci classes are any more competent to do productive work?
I'm all for making money but only off things of value. Otherwise you waste a lot of time trying to sell [re: market] things of substantially lower value [re: intel processors] just to make sure you can stay in business [re: partner with Dell].
Tom
Someday, I'll have a real sig.
>How do we get out of this mess?
Stop treating your workers like shit! Seriously,
if you want to keep people all you have to do is do this:
1. Make anything other than 40-hour weeks very rare.
2. Make chronic bad project planning and missed deadlines
result in the termination of the management staff.
3. Never threaten an employee's employment in front of their peers.
You might as well ask them to stop working and concentrate on finding
a new job.
4. Give regular reviews, at least every 6 months. Rate each
attribute on a scale of 1-10. Terminate employees who score low
and make that part of the initial employment agreement. Never keep
poorly peforming employees on staff - it kills morale.
5. As a direct manager, never let anyone in the company, including HR,
give direct instructions to an employee. All, and I mean ALL direction
goes through the direct manager -- no one else.
6. Hire only employees who are residents of the country in which
the company was founded. Sorry, but anything else is just demoralizing
and tends to evoke #3. If you want to have an office in India go ahead --
just don't expect US peer employees to train them -- this is management's job.
7. Never force employees to work on a major holiday. Ever.
8. Pay the market rate and never ask an employee or consultant to
take a pay cut.
9. Never swear or otherwise verbally abuse an employee. This should be
grounds for immediate termination.
10. Never ask an employee to work when they are obviously ill.
I am sure there are many more but the above would be a good start.
Right now there is no call for employee loyalty. Companies do not
show any loyalty towards employees (Google Layoff).
China isn't meaningfully Communist any more, and hasn't been for some time. It's totalitarian-capitalist -- and as much as those of us who live in (more or less) capitalist (more or less) democracies might like to believe otherwise, totalitarianism and capitalism can get along perfectly well together. The deal is, basically, "We'll let you make money as long as you keep your mouth shut; otherwise we'll have to kill you."
Conclusions about the convergence of China and the US are left as an exercise to the reader.
The correlation between ignorance of statistics and using "correlation is not causation" as an argument is close to 1.
People who come to the US to study, get advanced degrees and stay back in the US to work as highly skilled and specialised engineers/doctors/scientists.
The ones who work in the BPO sector or the IT sector are basic code monkeys.
Those who do make it into all those MS/Ph.D programmes are genuinely skilled - cutting them out will only ensure that R&D programmes experience a shortfall. And that one-advance-in-AI-to-make-outsourcing-redundant, that becomes so much further off.
One of the basic reasons that a US programmer is expensive is because the education is expensive.
I'd have to disagree. The basic reason that a US programmer is expensive is that the standard of living in the US is a lot higher, especially in the locations where most corporations have setup shop. This is hardly surprising, given that in the past programmers were a relatively rare commodity and so they developed rather exaggerative salaries (dotcom bubble). Further, companies had to be in larger metrapolitain areas to be take seriously or cities virtually grew around many corporations that clustured together. As a result, the communities they live in/move to have gained rather distorted salary demands due to property rates. Simply moving a corporation to the middle of nowhere would greatly reduce salary demands of the *many* people who are interested in a job. This is the basis for calls to "outsource to rural America".
It sounds like in India it is the case that many people are unwilling to move from where the live but the population density is so high that one can basically go anywhere and find enough people to form a development team. As a result, there isn't a sharp rise in salary demands because the excess spending money of these programmers ends up being distributed around the country instead of a few hotspots.
A similar idea could be constructed in the US by simply locating a broad area with programmers and setting up multiple development houses spread out across the area. Think of it as software franchising. Such places would then be capable of meeting the demands of one or more companies in projects--whether it'd be better if each franchise only served one company or was effectively a contractor isn't clear to me. This alone would greatly reduce the rates of development costs in the US. In the end, the greater wealth of India and shortage of programmers there (long-term ones, I mean) will require some means of utilizing the relatively untapped multitude of individuals who need not live in the most expensive parts of the US. I think outsourcing to both areas is a good idea.
Eurohacker European paranoia, gun rights, and h
Thank you for letting us know how it looks from the other side. I agree that we're in a vicious cycle here. I agree that there are employees that will screw over their boss in a New York minute--I know, I was one of them. I once screwed over one boss so bad he refused to hire anyone else from the staffing agency that I got hired through.
But, let me tell you, I am paying dearly for that. The skills I had which were hot stuff five years ago don't mean anything today--the job market and the skills have changed just enough that I became essentially unemployable in today's job market.
I have a friend who had a job at a company where he was making less than half of what I was making at the height of the dot-com madness. When the dot-com party ended in 2001, I was laid off and he wasn't. When no one could gets jobs in 2002, he still had his job and I didn't. He is probably still working at that same place to this day. No, he's not making a zillion dollars, but he's making enough to pay the rent and doesn't have to worry about where he will find his next job.
So, yes, a lot of people you train will end up working somewhere else and screw you over. But I think some employees will be faithful, especially the ones with wife and/or children, as long as they make enough to pay the rent.
This is a case of the Tragedy of the commons. Basically, loyal, long-term employees don't benefit a company only looking at the quarterly returns as much as constantly hiring young workers. It costs more to have older workers, in terms of higer health premiums and things like pensions. However, there are benefits to a company with a long-term loyal staff of hard workers: There is not the constant expense of getting new workers up to speed and having unproductive employees (you don't know if that new worker is going to be productive or not until they work for you).
It's a difficult situation, and one which I think will ultimately cause America (or Europe) to no longer be the most wealthy nation in the world. I can see the problem, but finding a solution is a lot harder.
Thanks, again, for your input; it's nice to know how the person on the other side of the interview desk feels.
And you are experiencing "reformed" India. It was much worse before 1980, in the days of the "Permit Raj".
But what is the standard deviation? My point was more that there aren't hotspots with overly inflated prices, like Tokyo, Silicon Valley, or Redmond. Prices in Silicon Valley, a prime example, are insane compared to where I live (the Midwest). A simple example is that the median price of a house in Silicon Valley is around $700,000 (http://www.siliconvalley.com/mld/siliconvalley/13 422709.htm). In comparison, the price of a house in the Midwest is in the $100,000-$200,000 range as median.
With a little math (ie, assuming a 30 year morgage), it's possible to show that one has to pay 3.5x as much in Silicon Valley for the house alone (ie, ~$1400 more per month). Take into account things like property tax and higher prices for food due to high property rates or driving farther, hence using more gas, to go to stores that aren't on high cost real estate, and clearly there's a price premium for living in a specific location when there's no real sign that it's even worthwhile (if it were, India outsourcing wouldn't make sense; New Delphi outsourcing might).
Now, if a lot of businesses started hiring across the US, I'm sure wages would increase. But it'd be a more uniform increase without massive spikes over land prices; companies could just move if a county/state was trying to shaft them. And in the end, more uniform hiring across a country does end up improving the whole country, instead of hot spots (like California) having federal funds be the method of redistributing wealth. So, it's great news that average India wages are increasing. There's room to hire in the rural US as well.
Eurohacker European paranoia, gun rights, and h
A company is not a country. When you work for a company, you're making a free exchange of your services for their money, and either of you is fully entitled to stop that relationship whenever you want, unless there are additional contract terms that apply.
The problem with that is really two fold. One, you have employees who *don't care* about the company. They are more likely to cut corners, or tell potential customers that they might get a better deal elsewhere, or just slack off.
Heck, where I currently work, I do what is in my contract by the letter. It's a retail position, so it often means my standing around in my department, even when nearby departments are swamped. I'm happy to stand there and be paid, and otherwise just talk with other employees or watch other employees work.
Heck, it's not in my contract to help them in another department. And, my manager is fine with this, because it's what his contract stipulates...
Now, if I cared about the company, felt that it succeeding meant anything to me, I might go help out the other employees - and make the company do better as a result. When it's slow, I might do other work so the company doesn't need to, say, hire another person to do stocking or something.
But they don't pay me enough, or offer any benefits, or any real chance of advancement, so I really don't care. I can find hundereds of retail jobs, so if they go under, it really doesn't matter to me.
Two, if someone hired me at another retail store, I'd be more than happy to tell them some ideas based on where I currently work. Wal-Mart loses managers all the time to other stores and the other stores get the benefit of Wal-Mart training... None of this is against my contract, I don't have a non-compete in a line retail job...
The point is you won't get very much out of employees if all you want is by the contract, and you don't care about community or loyalty. You'll have a bunch of people who will stand around doing nothing for hours getting paid till the manager comes and tells them to go home early or the store closes. And you'll have people who do the minimum necessary to not be fired because they don't care.
And for all sorts of reasons I'd think you'd at least want your employees to care if your company stays in business.
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